Selected news articles which highlight important policy issues.

News: Weekly Archives

News for the week of 10-19-2004

US’ Snow Says Rest of World Should Pay More for Drugs
Reuters News, 10-19-04

Which is not to say that there are not ways to lower drug prices in America. Encouraging competition among pharmacies, as the recent Medicare-sponsored efforts to highlight the different prices nearby pharmacies charge for the same drug, will help. So, too, will efforts to push other countries with price controls to pay more of the share of drugs developed in the United States.

Again, basic economics is at work. A drug costs a certain amount to develop and a certain amount to produce. Like with software, CDs, and other knowledge-based products the development cost is far greater than the production cost. As long as a firm can recoup all its costs plus a reasonable profit, it ought to be indifferent as to how they recoup their costs.

In concrete terms, that means that drug companies can engage in differential pricing so long as the price in some nations is greater than the marginal cost of production and the price in other countries covers the costs of development. The U.S., with its free-market approach to drug pricing, has increasingly been the venue in which to recoup development costs as other nations use their government price controls to push prices closer to the marginal cost of production.

Treasury Secretary Snow knows that strategy is no longer viable: Americans are tired of bankrolling the rest of the world’s drug consumption. If he or his successors are successful in raising this issue in trade talks, price increases in the U.S. should moderate as citizens of other nations start to pay the true cost of their drugs.

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Buying Health Insurance, Cafeteria Style – Some Employers Offer a Menu of Deductibles, Co-Payments, Networks and Prescription Plans
Wall Street Journal, 10-19-04

This article emphasizes the increasing role competition is playing in American health care. Employers are now giving employees multiple options when it comes to health insurance, allowing them to tailor deductibles, co-insurance levels, provider networks and prescription-drug options to meet their needs. This is a welcome development, as many of America’s health care woes can be attributed to habits that treat health care differently than other parts of the economy. Bottom line: health care is like other goods; if you make consumption free or subsidized to the user, the user will demand more of it than he or she would if the user pays for it with his or her own money. Practices like this force everyone to start thinking about what they really need, and what they are really willing to pay for, and that can only help make American health care more efficient and more effective.

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Taking Aim at Ads for the Purple Pill
The New York Times, 10-19-04

Is it possible to exaggerate the chutzpah of the trial lawyers’ bar? This article describes a lawsuit alleging that AstraZeneca’s direct-to-consumer advertising on behalf of Nexium is deceptive and caused consumers to shun the cheaper generic drug, Prilosec in favor of the patented Nexium. The result: “billions of dollars being spent unnecessarily by consumers.” Note that there are no claims that anyone was actually harmed by taking Nexium: the only harm alleged is the supposedly unnecessary expenditure of money.

As MPT noted last week, complaints about direct-to-consumer advertising are not new, nor are they limited to the prescription drug world. But all complaints about advertising, no matter what their object, share one common theme: we are victims of images which bombard us, causing us to do things against our will and our better judgment. With this in mind, this lawsuit makes sense, as it is merely an extension of the theme that pervades much mass litigation in this country. This litigation often assumes that there is a powerful interest which forces some injury upon people who are helpless victims in the face of the interest.

The helpless victim mindset, though, ignores the role individual choice and free will play in human life. People can ignore advertising that does not fill a need, and ignore products they purchase with information gleaned from advertising if those products don’t satisfy, but by the logic of the complaint these people either don’t exist or are irrelevant. Even if the complaint’s claims about the relative benefits of Nexium and Prilosec were true – and it is far from clear that they are – people who choose to consume the higher priced drug do so for some reason. The complaint’s line of thinking would apply to every sort of economic decision, from people who choose SUVs when smaller cars would do just as well, to those who choose luxury clothes when cheaper duds would work, and so forth and so on. Do we really want to place the law into decisions of this sort? Would we be willing to live with the consequences if we did?

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Canadian Groups Seek Ban on Cross-Border Drug Shopping
Associated Press Newswires, 10-19-04

Ever read the famous Winnie The Pooh story about when Pooh gets stuck in Rabbit’s hole? He gets stuck because (now I’m spoiling the story for the rest of you) he invites himself over to Rabbit’s house for lunch, Rabbit is too polite to resist, and Pooh finishes off every last drop of honey in the place.

Canadians have woken up to the fact that U.S. importation of drugs is just like Pooh’s self-invitation, and they have no intention of ending up like Rabbit with no drugs for their own. That’s why groups claiming to represent 10 million Canadians – one-third of the country, but fewer people than used Lipitor in the United States – have called for Canada’s federal government to ban drug EXPORTS from Canadian pharmacies. They know that their low prices are due to government price controls, and they know that if the U.S. gets into the act one of two things will happen – either drugs will run out in Canada as pharmacies rush to send drugs to the U.S. (whose wealthier citizens can afford high “shipping fees” and “handling charges”, or prices will have to rise in Canada to entice those pharmacies to keep supplies at home. The bottom line to Americans: we’ll have to solve our drug problems at home, since other nations are not likely to let us crash their parties.

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The Informed Patient: Does Disease Management Pay Off?
Wall Street Journal, 10-20-04

“Disease management” is one of the hottest items in medical policy, as third-party payers struggle to reduce payments for chronic conditions. As the article notes, “people with chronic conditions account for more than two-thirds of the nation’s $1.6 trillion medical bill. . . . The aim of disease management . . . is to educate patients about their disease and help them manage it symptoms, such as controlling blood sugar in diabetics to stave off blindness, kidney failure and amputations.” The article goes on to state that there is as yet little evidence showing these efforts reduce expenditures, although it is still too early to know for sure.

It is difficult to live with chronic conditions, and many things, some outside of people’s control, cause them. But many chronic conditions are brought about at least in part by lifestyle choices people engage in for many years, and in these instances one must ask whether our current health care payment system is contributing to the problem. Most people pay only a small part of their total health care bill each year; the bulk of the payments are made by the third parties who insure them and the third parties, like employers, who pay for the insurance. These people do not, as a matter of course, adjust the amount paid by each individual for the true risk they bring, and in many cases are forbidden by law from doing so. That means people are effectively subsidized when they engage in detrimental behaviors like smoking, drinking or overeating. Perhaps it’s time to re-think these policies and encourage companies to price their products on a risk-adjusted basis. If people had to pay a few hundred dollars a year more each year if they were obese or smokers – as they often must with their life insurance policies – perhaps they would change their ways before their chronic conditions even develop.

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Cool technology
The Economist, 10-21-04

Vaccines often have to be refrigerated to keep them viable; if they reach too high a temperature they degrade and become useless. This may not be much of a problem in New York or Paris, where doctors have ready access to refrigerated storage facilities, but it is a huge problem in developing nations (for instance, in Africa) where finding a single cold soda is nearly impossible, let alone providing refrigeration for thousands or millions of doses of critical vaccines. As a result, "experts estimate that almost half of all vaccine doses are wasted because of temperature damage, which is cold comfort to the families of the 2m children in poor countries who die every year from measles and other vaccine-preventable diseases."

Scientists may have found a solution to this problem by studying how some plants and insects can hibernate for decades, or even hundreds of years, in the face of drought. The process, called anhydrobiosis, occurs when "[plant or insect tissues] produce sugars which turn into a syrup as they start to dry out, eventually forming a sort of glass which preserves them perfectly." When water is introduced into the environment, the sugars dissolve and the organisms spring back to life. Researchers at Cambridge Biostability are using this technique to coat vaccine molecules with a sugar spray that keeps them protected in small glass-like beads. When these microspheres are injected into the human body the sugary coating dissolves in the bloodstream and releases the vaccine.

This new technique appears to be as safe as standard vaccination techniques, is highly durable in high temperatures, and may even allow several different types of vaccine to be applied in the same injection. Perhaps best of all, "by eliminating the need for refrigeration, the technology could save up to $300m a year in global vaccine costs, which means another 10m poor children could be protected."

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Vioxx ads topped $500M Drug maker Merck spent heavily against rival Pfizer
The Star-Ledger, 10-24-04

The Vioxx recall has generated fresh anxiety about direct to consumer advertising for prescriptions drugs. Critics allege that drug companies use advertising to create demand for expensive "copy-cat" drugs that offer little benefit to consumers over cheaper generic alternatives; critics are also worried that the advertisements don't offer enough information about potential side-effects.

However, critics fail to note that advertising creates competition between drug brands, forcing companies – as Merck did in the case of Vioxx – to study and document real benefits versus their competitors. In its zeal to prove that Vioxx had cancer preventative properties, Merck launched a long-term study of the incidence of colon polyps in patients taking Vioxx, and also collected information about heart disease incidence in the same patient group. Data from this study led directly to Merck's recall of Vioxx, and helped physicians focus on why some Cox-2 inhibitors seem to increase the risk of cardiovascular events, while others may not. Pfizer, the maker of Celebrex, is now starting its own 2 year study that it hopes will prove that Celebrex doesn’t pose an elevated risk of cardiovascular events in patients who take it long-term.

Pharmaceutical companies marketing statins have done much the same thing, commissioning head to head studies, giving physicians a much better sense of which drugs work best for which patients and why. Absent the ability to reach out to consumers, companies would have significantly fewer incentives to engage in this type of comparative safety and efficacy research, which undoubtedly benefits medical research and patient health.

In other words, direct marketing ensures that information about drugs gets out faster, and, on the whole, tends to be more accurate than it would be if consumers were left in the dark entirely.

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A world of difference: A nonprofit drug company works to wipe out diseases that plague developing nations but are ignored by Western pharmaceutical giants
Los Angeles Times, 10-25-04

Drug development is so expensive and unpredictable that drugs for rare diseases that afflict small numbers of patients (or even large numbers of patients in developing nations) are often seen as unprofitable by drug manufacturers who, after all, must make a profit to survive and keep their research pipelines flowing with other, more viable medicines. Still, public health suffers most in countries that can least afford the additional financial and human costs of epidemics from AIDS, TB, or malaria.

This doesn’t mean, however, that industry is just sitting on it hands and watching people die. Public-private partnerships are springing up to merge the expertise of private companies with the philanthropic backing of large foundations. One example is the relationship between OneWorld Health, a not-for-profit drug company, and the Bill and Melinda Gates Foundation. OneWorld Health approaches established drug companies and convinces them to "donate the rights to promising therapies languishing in their laboratories in exchange for generous tax write-offs – and valuable public relations benefits." In this model, the private sector identifies promising new treatments and then donates the rights to develop the compounds to OneWorld Health, which then focuses on transforming the compounds into viable drugs, thereby avoiding "the huge expenses of developing medications from scratch."

Recently, OneWorld Health was able to take a grant for less than $5 million from the Gates Foundation, and work with the WHO to develop a new antibiotic, paromycin, that has proven 97% effective against a parasitic disease (leishmaniasis) that kills 200,000 people every year in India, Nepal, Bangladesh, and elsewhere.

Blaming pharmaceutical companies for doing what they are supposed to do – protecting their investors and developing profitable medicines – is a recipe for failure when it comes to global health. Instead, activists should promote more public-private partnerships like this one, that bring first world medicines to the developing world at a price those nations can afford, without crippling the property rights that undergird medical progress.

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The Latest Birth-Control Battle: Having Won Coverage for the Pill, Employees Now Press for Insurance to Pay for Newer Alternatives
Wall Street Journal, 10-26-04

There is a widely used, safe, highly effective contraceptive available for women: the pill. In fact, the technology behind the pill is over 50 years old and it has proven itself to be the contraceptive of choice for many women based on its reliability and convenience. Today, some version of the pill is used by 80 million women around the globe. In the U.S., the pill is so popular that over 80% of employer based health insurance plans covers the purchase of birth control pills – meaning that for many women, prescription birth control is effectively free.

And yet, more birth control options continue to enter the market in response to ongoing demands for newer, safer, and more convenient birth control options. Today, women can choose from many available options: hormone patches, injectible hormone implants, new IUDs, or sterilization - with more products still to come.

However, what is astonishing is that the drug companies haven't been pilloried for heaping new birth control options onto consumers and insurance companies. After all, aren’t most of these new medications really "me-too" drugs, copycats of the same basic technology, repackaged by an industry eager to capture profits rather than creating new medicines of real value? Why aren’t industry critics demanding that the FDA only approve birth control methods that are significantly better than the pill and withdraw these other products from the market? Wouldn't women be just as well off with two or three birth control options, as opposed to 10?

The irony is that if this was any other drug category companies would face withering criticism for marketing this many so-called "me-too" drugs, with critics discounting claims that large numbers of women react differently to the pill or just want another option. But if convenience, consumer choice, and competition are good for contraceptive drugs, why not for painkillers, statin drugs, or impotence treatments?

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Novartis Sets Deal To Seek New Drugs For Fighting TB
Wall Street Journal, 10-27-04

Tuberculosis is the second leading cause of death worldwide - second, in fact, only to AIDS. The two diseases actually operate in a grim synergy, with TB and AIDS infecting many of the same patients, "weakening their immune systems and hastening death." Like AIDS, TB proliferates in developing nations that have inadequate health care infrastructure and are seen as poor markets by pharmaceutical companies who have to recoup their staggering drug research costs. As a result, research on new drugs to treat infectious diseases in the developing world has slowed to a crawl.

To bridge the gap between first world medicines and the patients who need help most, foundations like the Global Alliance for TB Drug Development are forming partnerships with drug manufacturers like Novartis to underwrite drug research and use private sector expertise to produce enough cheap drugs to meet the needs of developing nations.

In this case, the Novartis Institute for Tropical Diseases has formed a partnership with the Global Alliance to develop a new family of TB medicines. "Novartis has pledged to make [these treatments] available without profit to poor patients in developing countries." The first drug in the pipeline is PA-824, which will enter Phase I testing in 2005. The drug "differs from existing treatments by killing both fast-growing and slow-growing strains of TB bacteria." It may also be effective against drug resistant strains of TB that are particularly dangerous. For more information on how (and why) industry and researchers are struggling to develop new treatments for infectious diseases, see Bad Bugs, No Drugs, published by the Infectious Diseases Society of America.

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Project FDA.


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